Wildly Bullish Liquidity Flows Should Benefit Stocks More Than Treasuries – Professional Edition

Here are a few of the key bullet points from this report.

• The 10 year yield abruptly reversed on Friday, spurred by the jobs news, but underlain by bank and FCB selling, and increased Primary Dealer shorting of 10 year futures. It’s not yet clear whether this is an acceleration of the intermittent shift in sentiment away from Treasuries. The 1.79-.80 area is a key benchmark.

• After seeing the most bullish liquidity conditions of the year in April, the markets will still see bullish liquidity conditions. It won’t be as much as in April, but more Treasury paydowns are coming in May and June to add to Fed cash injections to the market.

• Strong tax collections have blown away previous forecasts. We’ve been expecting reduced Treasury supply and that was confirmed by the new TBAC estimates released last week.

• The surge of liquidity in April stacked the deck for the markets’ reactions to the jobs numbers when there was just a tiny positive surprise in the numbers.

Read about these and the following subjects in this report.

Table of Contents

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Treasury Auctions
Week Just Completed
Week Ahead
Treasury Auction Takedowns By Investor Class
Primary Dealer Trading
Bond Fund Flows
Bank Purchases Of Treasuries
Federal Government Cash Flows
10 Year Treasury Yield
US($) Dolor Index

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